The ATO has reminded individuals to make sure they get their deductions right this tax time. Assistant Commissioner Graham Whyte said the ATO has seen "claims for car expenses where logbooks have been made up and claims for self-education expenses where invoices were supplied for conferences that the taxpayer never attended". While noting that most tax agents do the right thing, Mr Whyte said "sometimes the ATO identifies tax agents offering special deals, inflating claims to generate larger refunds".

Mr Whyte said that in 2014–2015 the ATO conducted around 450,000 reviews and audits of individual taxpayers, leading to revenue adjustments of over $1.1 billion in income tax. Mr Whyte said "every tax return is scrutinised" and if a red flag is raised and the claims seem unusual, the ATO will check them with the claimant's employer. In addition, Mr Whyte reminded taxpayers that this year the ATO has introduced "real-time checks of deductions for tax returns completed online".

The ATO has prepared the following case studies.

Case study 1

A railway guard claimed $3,700 in work-related car expenses for travel between his home and workplace. He indicated that this expense related to carrying bulky tools, including large instruction manuals and safety equipment. The employer advised the equipment could be securely stored on their premises. The taxpayer's car expense claims were disallowed because the equipment could be stored at work and carrying them was his personal choice, not a requirement of his employer.

Case study 2

A wine expert working at a high end restaurant took annual leave and went to Europe for a holiday. He claimed thousands of dollars in airfares, car expenses, accommodation and various tour expenses, based on the fact that he'd visited some wineries. He also claimed over $9,000 for cases of wine. All his deductions were disallowed when the employer confirmed the claims were private in nature and not related to earning his income.

Case study 3

A medical professional made a claim for attending a conference in America and provided an invoice for the expense. When the ATO checked, it found that the taxpayer was still in Australia at the time of the conference. The claims were disallowed and the taxpayer received a substantial penalty.

Case study 4

A taxpayer claimed deductions for car expenses using the logbook method. The ATO found the taxpayer had recorded kilometres in the logbook on days where there was no record of the car travelling on the toll roads, and further enquiries identified that the taxpayer was out of the country. The claims were disallowed.

Case study 5

A taxpayer claimed self-education expenses for the cost of leasing a residential property, which was not his main residence. The taxpayer claimed he had to incur the expense of renting the property as he "required peace and quiet for uninterrupted study which he could not have in his own home". This was not deductible.
In addition to the rental expenses, the cost of a storage facility was claimed where "the taxpayer needed to store his books and study materials". The taxpayer claimed he needed this because of the huge amount of books and study material associated with his course and had no space in his private or rented residence where these could be housed. This was not deductible.

The cost of renting the property was around $57,000, with additional expense of $7,500 for the storage facility. The actual cost of the study program he attended that year was only $1,200.

Source: ATO media release, "ATO exposes dodgy deductions", 16 August 2016, https://www.ato.gov.au/Media-centre/Media-releases/ATO-exposes-dodgy-deductions/.